Equity exchange traded funds enjoyed robust inflows over November, overtaking the fixed-income side in new creations for the year, as investors chased after the stock market rally.
Fixed-income ETFs initially saw huge inflows in 2020, outpacing investments into the equity ETF side after the coronavirus-induced sell-off caused many to shift into the relative safety of bonds. However, equity-based ETFs brought in a record $81 billion in net inflows over November, bringing the total for the year to $196 billion, Bloomberg reports. In comparison, fixed-income ETFs only saw $17 billion in inflows over November to total $192 billion for the year.
After news broke of a potential Covid-19 vaccine and the post-election results helped assuage political fears, investors shifted back into riskier stock assets, with the most beaten-down segments of the market, such as small-caps and energy stocks, benefiting the most. Meanwhile, global equities also enjoyed their largest monthly gain since at least 1988, and multiple major benchmarks are trading at or near all-time highs.
“The prospect of multiple Covid-19 vaccines on the horizon, combined with diminished uncertainty over the presidential transition, boosted investor appetite for stocks. Equity ETFs reflected that,” Nate Geraci, president of investment-advisory firm the ETF Store, told Bloomberg. “Given that November was a historic month for stocks and with some investors questioning the risk/reward profile of bonds, it’s no surprise to see equity ETF inflows surpass bond ETFs.”
Fixed Income Still Thriving
Despite the recent focus on equity ETFs, fixed income ETFs still experienced a great year. After the Federal Reserve announced it would support liquidity in the debt markets and even buy corporate bond ETFs for the first time, billions of dollars funneled into credit-related funds and erased the deep discounts from the initial selling earlier in the year.
Nevertheless, total assets under management in U.S. bond ETFs were at roughly $1.1 trillion while stock ETFs held at $4 trillion.
For more market trends, visit ETF Trends.
